The letter Edna Frazier-Cromwell received two weeks ago should have begun with one of those "good news-bad news" jokes. Frazier-Cromwell, chairwoman of the 14th and U Coalition, had happily opened the letter, which was from a consultant who wanted to congratulate the organization on its receipt of an Urban Development Action Grant (UDAG).

Having helped put the proposal together, the consultant had heard the news almost as soon as the U.S. Department of Housing and Urban Development announced the awards April 7.

But the consultant had also heard some other news that she passed along in the letter -- budget cuts passed by the Senate only five days before the grant was awarded might stop the flow of dollars began.

Said a philosophical Frazier-Cromwell, who is postponing jubilation about the award until she learns something more definite: "It just doesn't seem fair that they would cut it out at this point."

The coalition's uneease is one very poignant local example of the anxiety contractors and community groups around the country are feeling as they await the budget decisions of an increasingly thrift-conscious Congress. The anxiety is especially acute for participants in the UDAG program, a controversial $675-million brainchild of the Carter administration.

The $160,000 UDAG grant to the coalition would be used to leverage another $400,000 in private funds to provide cut-rate housing rehabilitation loans to Columbia Heights homeowners. But the award to the year-old coaltion was an achievement in itself: not only had the grant-writing novices managed to squeak past better-known local competitors, but the UDAG grant was only the third ever awarded a D.C. group. organizations in Baltimore have won 13. Unfortunately, problems with the grant began before the coalition could celebrate its triumph. p

On March 19, the Senate Budget Committee voted to add $300 million to proposed Reagan cuts for projects controlled by the subcommittee on banking, housing and community affairs for fiscal year 1981. The full Senate passed along the recommendations to the House.

According to Becky Davies, a Senate budget analyst, the Budget Committee recommended that the extra cuts come largely from funds for community development programs, but she noted that the recommendation is not binding on the Senate or House.

HUD officials say they are proceeding as though the agency will receive funding for grants already awarded. Jackie Conn, a UDAG spokeswoman, said she "has been led to believe grants are secure" through 1981, but that "what will happen in 1982 is indefinite." The current budget calls for UDAG to be trimmed and incorporated into a community development block grant program in 1982.

Davies agreed that "there is enough money to fund anything that was in the pipeline when we took up these (cuts)."

Despite the confidence of some government officials, members of the coalition are proceeding slowly until they are certain the money is really theirs. Conn said she did not think the grant would be withdrawn, but added, "We can't say at this time at what stage of the funding process the money is secure."